The synthesis and secretion of pulmonary surfactant, a complex mixture of lipids and proteins, by the alveolar epithelium is essential for maintaining the structural integrity of the alveolus during respiration; surfactant insufficiency leads to respiratory distress syndrome, a leading cause of morbidity and mortality i neonates. Surfactant- associated Protein B (SP-B), referred to as SPL (Phe) in the previous funding period, is absolutely required for the function of pulmonary surfactant. Human SP-B is synthesized as a preproprotein of 381 amino acids which is processed to the biologically active peptide of 79 residues by proteolytic cleavage of N- and C-terminal peptides from the precursor. Proteolytic processing of the proprotein, therefore, represents a critical steps in the overall regulation of SP-B expression. The current proposal describes studies to: (1) identify the protease(s) and cleavage sites involved in SP-B proprotein processing in vivo, (2) identify peptide domains involved in the transport and sorting of SP-B within the secretory pathway of the Type II cell, (3) define the role of SP-B in directing surfactant phospholipid trafficking in the biosynthetic and endocytic pathways of the Type II cell, and (4) determine the fate and function of the N- and C-terminal peptides following cleavage form the SP-B proprotein. The overall goal of this research is to determine how SP-B processing is integrated with the biosynthesis and metabolism of other components of the pulmonary surfactant system.